An analysis of literary sources confirmed the hypothesis that the relationship between the state and society is determined by a set of institutional conditions that collectively determine the functioning of the economic system. The literary review pointed to the need for a comprehensive perception of institutional conditions as an environment, taking into account territorial bases, legal aspects, financial and economic relations, interpersonal interaction. It was found that institutionalization is the basis for any social changes in society, in particular for a large-scale reform of local self-government – financial decentralization.